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Could 30-year Mortgage Rates Go Lower?

October 7, 2020
Posted in Programs
October 7, 2020 derekevansteam

Today’s rates are low. Really low. This makes mortgages cheaper and homes more sellable. Buying a house is more affordable than it has been in almost 50 years. And mortgage rates are to thank. Below you can see the average 30 year fixed rate since 1976!

So, could 30-year mortgage rates go lower?

The short answer is that mortgage rates can always go lower. But you shouldn’t expect them to.

Because mortgage rates are based on the bond market, they are really only limited by how low certain bond yields can go. We use the 10yr Treasury yield as a benchmark, and though it doesn’t actually dictate mortgage rates, there is a strong correlation between the two and it’s an easy one to follow!

The 10yr has historically been lower than average 30yr fixed mortgage rates by 1-3% (and in recent history, 1.5-2.0%). With 10yr yields capable of all-time lows just over 0.3%, in theory it implies mortgage rates of anywhere from 1.3% to 3.3%.

30yr fixed rates never made it lower than 2.75%, and at that point 10yr Treasury yields were around 0.50%. That’s a 2.25% spread between the two! So really, Treasury yields would need to remain at or under 0.50% for years in order for that spread to get as small as past precedent suggests it can be.

Follow along: add the 10 Year Treasury Yield to your phone’s Stocks or Finance App and follow along to see what rates do!

Looking to buy? Take advantage of today’s low rates and get pre approved now: